Department Stores Doing Big Business

Discussion
Mar 27, 2006
George Anderson

By George Anderson


The people who work at chains such as Macy’s, J.C. Penney, Nordstrom, Neiman Marcus and Boscov’s would like everyone to know that, despite rumors to the contrary, the department store business is doing just fine, thank you.


Jim Sluzewski, a spokesperson for Macy’s parent Federated Department Stores, told the Albany Times Union, “When people say to me, ‘Why aren’t people shopping in department stores anymore?’ I tell them our sales this year will be $27 billion, which is a lot of shopping in department stores.”


Federated chief executive Terry Lundgren is counting on his strategy of making Macy’s a national retail brand to help elevate the department store’s business to new heights.


J.C. Penney spokesperson Quinton Crenshaw said the chain continues to grow sales across its online, catalog and physical store businesses. Penney expects to open 27 additional freestanding and mall stores this year.


Penney’s strategy has been to focus on fashion and home furnishings combining national and proprietary brands to set itself apart from other department stores and discounters.


“They position us to be the preferred shopping choice of Middle America,” said Mr. Crenshaw.


Ken Lakin, chairman and chief executive of the family-owned Boscov’s, said his company and others in the department store sector face the greatest competitive challenge from a nationally branded Macy’s.


“They’re probably the best merchants in the country today, if not the world,” he said.


Mr. Lakin also sees continued competition from discounters such as Wal-Mart but he indicates that threat may be less of a factor in his business’ performance than how others in the department store group perform. He also suggested that Wal-Mart’s competitors have learned valuable lessons of survival having had to go up against the retailing giant every day.


Using a jungle analogy, Mr. Lakin said, “It’s the 900-pound gorilla (Wal-Mart) that could become extinct. The spider monkeys and chimpanzees (other retailers) are doing fine.” 


Moderator’s Comment: What need(s) do department stores fill for American consumers today? Where do you see opportunities
for the channel to grow? Which banner is best positioned for growth and why?

George Anderson – Moderator

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23 Comments on "Department Stores Doing Big Business"


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Joseph Peter
Guest
Joseph Peter
14 years 10 months ago

Macy’s is going to do great everywhere but Chicago. Macy’s has a very negative view by Chicagoans…

As far as Chicagoans are concerned, Marshall Field’s was just fine…and an equation that did not need to be messed with.

I suspect Macy’s sales will fall drastically in Chicago during the name conversion.

It’s pretty bad public relations for Federated when the Chicago Tribune published a political cartoon showing a cowboy representing Federated, shooting his foot with a Marshall Field’s shoe on. And Federated just doesn’t seem to care, and that is what is making Chicagoans mad!

Is this the kind of publicity Federated wants?

The department store wars will be getting very interesting here in Chicago!

Lee Kent
Guest
14 years 10 months ago
The department store does indeed have a niche in the middle market, and as long as they recognize this and stay ahead of their middle market customer’s wants, they can and will gain back some of that declining market share. The middle class soccer mom as mentioned above needs to be able to build a “mix and match” wardrobe, not only for herself but also for her entire family. The department store can meet this need if they will get their sales people to stop spending all their time chatting with each other, stocking the floor and get them out from behind that cash register. Some department stores are already well on their way to un-tethering the sales person but others have still not quite figured out how to find the money to do this, since it often means ripping out the old antiquated store infrastructure to embrace a new pervasive, service oriented architecture. Those in the latter group will find themselves on the auction block sooner rather than later. The next step is to… Read more »
Eric Holmen
Guest
Eric Holmen
14 years 10 months ago
Engage the customer, and department stores will win. The first thing on the to-do list should be to come up with a name other than ‘department’ stores – it’s meaningless to consumers. As a retail community, we need to figure out how we ‘complete’ the customer – something different for each store brand – where convenience meets entertainment, and where commerce meets community. Where information about how to enjoy life relates to the purpose for that department store’s existence. For Macy’s to make a success out of national expansion, they have to be more, much more, than merchants. Leveraged media buys, volume merchandise savings, and ubiquitous retail real estate mean nothing to the customer. I think every department store AND specialty retailer has the chance to excel in the coming years, based on how they engage and communicate with their customers. I’d love to hear what retailers and product manufacturers think: From a nuts and bolts perspective, can a department store exist if much of what it sells are the same things as Wal-Mart and… Read more »
Stephan Kouzomis
Guest
Stephan Kouzomis
14 years 10 months ago
Truly, the benefits of department stores are the first 5 points listed after the article plus: Doing what each department store does best and is known for – the point of difference. J.C. Penney reinvented itself by going to the shoppers and researching voids in the marketplace, competition, problems / opportunities etc., and then analyzing which shopper base is the most suitable for Penney’s. Then, with new product lines more upscale than before, and an advertising campaign that alerted shoppers to what J.C. Penney offers, this newly revamped corporation has been done justice, as has sponsoring the Oscars and major magazine spreads shown its commitment. The other department stores mentioned have made a conscious effort to advertise, merchandise, and promote their points of difference; execute well; and build their brand equity as well. It is no small feat for Macy’s to buy the leading department store chain in many markets, and effectively transfer the good will, and shopper loyalty of the acquired businesses. Gutsy as this was, Macy’s even did it during the October through… Read more »
Ryan Mathews
Guest
14 years 10 months ago

Consumer preferences cycle like everything else in business. And, let’s remember, all department stores aren’t created alike. The real or perceived higher service in some department stores will always make them attractive to a specific kind of consumer. So will the cache of shopping in certain stores. The lesson is — never write off any kind of format; it’s the execution inside the format that matters.

Ian Percy
Guest
14 years 10 months ago

My ultimate goal in life (well maybe not ultimate) is to go into a department store and see stuff that makes me go “WOW!”

Penney’s has the right intention: “to focus on fashion and home furnishings combining national and proprietary brands to set itself apart from other department stores and discounters.” Whether they actually do that or not is up for question.

Just try to buy a man’s casual shirt that is cool and different – can’t be done in a department store. For that you’ve got to spend $190 in a store named “Jacque’s.” Underwear and sweat socks I’ll get at the department store – now isn’t that a fun business to be in?

What department stores should do is totally revamp their purchasing teams – get rid of them all – and bring in people with personality and a risk orientation. Playing it safe down the middle leads to a bored un-loyal customer and eventual demise.

W. Frank Dell II
Guest
14 years 10 months ago
Some years ago, the department format was forecast to go the way of the buggy whip. The format is alive and well because it changed with the times and consumers. Most no longer sell TVs, electronics or household appliances. Three factors support the department format. First, it provides an enjoyable shopping environment. It is not pallet rack or miles of gondola shelving. Presentations are changed with the season, creating newness. Some consumers like to shop and have lunch, thus making a day of it. Second is the product quality. Merchandise quality is grouped into good, better and best. So many retailers focus on low prices and the only way they can achieve this is with lower quality goods. Consumers wanting better or best merchandise can only find it in department stores. Third is the service factor. Not everyone wants self service. The department store format will be with us for a long time. With aging and more affluent baby boomers, many even grow sales.
Ron Margulis
Guest
14 years 10 months ago

Because many if not most leading department stores have moved from stand-alone units to mall anchors, they have benefited from the cross-shopping experience preferred by consumers of many demographics. The days of making that special trip to center city to buy that special purchase are over in all but the biggest cities (look at the downtowns of mid-sized cities like Dayton, Des Moines and even St. Louis). So malls are a preferred shopping destination of a core segment of consumers, and department stores have to use this to their advantage. They need to make the trip as valuable as possible, and that may mean deviating from the CRM craze of the past decade and concentrating their promotions on activities that impact the customer while he or she is in a shopping frame of mind.

Camille P. Schuster, PhD.
Guest
14 years 10 months ago
Department stores fill a unique position for a group of consumers; a wide range of apparel, household items, home furnishings and fashion. So far, fashion has been associated with Target rather than with Wal-Mart. Low price choices have been associated with Wal-Mart for household goods and fashion. At Wal-Mart, there is a wide range of products but not a wide range of brands or choices within product categories. For those consumers who want a range of choices that are fashionable or a wide range of curtain choices or towel choices at reasonable prices, J.C. Penney has that offering. During sales, J.C. Penney has that offering at low prices. Other retailers such as Nordstrom or Macy’s offer a wider range of product choices than Wal-Mart or Target at a higher price point. For consumers who want that choice/quality/pricepoint choice, the department stores will continue to be a choice. While Wal-Mart has been successful at offering a variety of products at always low prices, that is not the only need for all consumers at all points in… Read more »
Bernice Hurst
Guest
14 years 10 months ago

Convenient one stop shopping.

Mark Lilien
Guest
14 years 10 months ago

To the alternatives given in the survey, another might be added, “Some people shop in department stores out of habit and because they don’t like the alternatives.” The department store audience is growing older, and the business is ever-more focused on clothing. As long as the number of competitors continues to decline and the square footage doesn’t increase, the remaining players should be OK financially. Declining and flat businesses can make nice profits if heavy new investments aren’t required and the competition isn’t aggressive.

j paresi
Guest
j paresi
14 years 10 months ago
Unfortunately, the department store executives haven’t acknowledged that their ‘core customer’ is being driven away by being bored or ignored to death, and a new generation of shopper needs to be cultivated now before it’s too late. This needs to be a mix of younger shoppers that have been specialty-focus marketed to since birth, and the younger baby boomers. Keep in mind, both groups are seriously time-constrained and appreciate convenience, savvy marketing and upmarket variety and selection. Also, what I find most shocking is the number of dept. store execs who don’t even understand the basic American trait of most shoppers as being ‘aspirational’…that they appreciate the idea of ‘buying up’ and would respond to a chain that supplies this basic psychology of merchandising. (IF you want cheap, there’s Wal-Mart and Dollar stores in abundance. Despite the average investment banker’s belief, you are not competing with them.) Here’s the problem in a nutshell….enough with the cookie cutter look, overstuffed aisles and departments, the overpriced in-house brands (that you know will go on sale next week…again)… Read more »
Bob Houk
Guest
Bob Houk
14 years 10 months ago

Few people are more skeptical about department stores than I am, but I do not find it at all surprising that they are doing (relatively) okay right now — the economy is going great.

So department stores are showing a little bit of growth — they’re still losing share. Come the next recession, they’ll be in the toilet again.

They ride the economic cycle, but each upturn they go up not quite as high as last time, and each downturn they drop a little lower. I see nothing that is likely to change this.

Nicholas Armentano
Guest
Nicholas Armentano
14 years 10 months ago
I think one of the untapped avenues of growth this year lies in the coming sale of the Lord & Taylor brand by Federated. I see an opportunity in Lord & Taylor, which until recently had a national presence and has a well-known brand name despite recent financial troubles. Lord & Taylor could be combined with any of the other regional department stores (Parisian, The Bon-Ton, Dillard’s, Von Maur) to create a national brand to compete with Macy’s. Coming this fall, Macy’s will be the only game in town in many markets (especially the Northeast and the west coast), the only place to buy Ralph Lauren and Tommy Hilfiger. Another company could buy the Lord & Taylor brand to compete with Macy’s on a national level. Another possibility is that some of the discount stores like Walmart that are looking to go upscale could buy the Lord & Taylor brand. Furthermore, I think apparel companies like Jones New York and Liz Clairborne should also consider buying Lord & Taylor or another department store since Macy’s… Read more »
Karin Miller
Guest
Karin Miller
14 years 10 months ago
As mentioned above, the department store channel, while healthy in some areas, is losing market share. Based on the fact that virtually none of the new retail construction seems to involve department stores, I would imagine this trend will continue. I believe that efficiency is becoming more of a factor in deciding where to shop. The shopping experience can be frustrating in the better department stores for the customer who knows what they want and wants to get in and out quickly, especially when the store is busy and/or understaffed. This is because there are so many “mini stores” within the department store that each require a high level of service be given by specific associates. If shopping for multiple products, the customer must often wait in separate, undefined queues while associates help others make up their mind about their purchases in areas such as cosmetics, jewelry and handbags. If there isn’t a line to get into the fitting room, the doors are probably locked and an associate needs to be found. And just how… Read more »
Richard Ray
Guest
Richard Ray
14 years 10 months ago

I have always admired Boscov’s for their ability to be a department store with a difference based on the “non-department store” departments they merchandise. Going forward, I may not think as much of them if they believe, as Mr. Lakin stated, that “Macy’s is the best merchant in the world.” Don’t follow Macy’s, because they don’t know where they are going.

Aaron Spann
Guest
Aaron Spann
14 years 10 months ago
Department stores do big business. I agree. What needs to happen in the market now are some visionary implementations. We need some modern-day Marshall Field’s and Joseph Horne’s. Someone needs to invigorate the concept and bring back special events like: Teen Boards (I can Remember Castner Knott Co. of Nashville having this), demonstration kitchens (I’ve seen one at Proffitt’s in Birmingham and one at a Dillard’s in Dallas), Personal Shoppers, spas and such. The list could literally go on and on. The biggest problem I see is that most companies expect an immediate return on investment. Well listen, you’ve spent 30 years driving customers away so don’t expect them to come back with the snap of a finger. (Macy’s in Memphis recently closed its new Cosi restaurant. Apparently the outlet wasn’t making enough money for them. What’s funny is that no one seems to realize that in order to elevate certain parts of your business you sometimes have to take a cut in other areas.) If you add value to your store, then you’ll succeed… Read more »
Craig Sundstrom
Guest
14 years 10 months ago
If you were to ask someone at NM or Nordstrom, they would tell you that they DON’T work at a department store: a retailer or specialty store, yes, but not a department store…and therein lies the issue: definition; generally that definition is “a large store, selling many different kinds of merchandise, all under common management;” price is not a criteria, which means that TARJHAY and – yes – (even) Wal-Mart are department stores; so in this sense, the department store is doing better than ever, and will probably always be around. But in the broader sense that people use the term, the future is ambiguous: although the term “anchor” is still used in the narrow mall context, it should be remembered that department stores were once anchors in many more ways – they sponsored parades and fireworks and seminars, their ads filled the newspapers and the airwaves, they were the disseminators – though not necessarily the leaders – of fashion. For a variety of reasons, some inevitable, some very definitely not so, these functions have… Read more »
Michael Tesler
Guest
Michael Tesler
14 years 10 months ago
Hold on. The fact that they are saying things are good should no longer mean anything to even the most casual of analysts. Did you ever hear Sears or Kmart say “things are not good”? We must go on what we see and what we know and never what they say. Yes, the well run upscale guys (NM, Nordstrom) are doing well. Yes, Penney’s, thru slick marketing and PR and by attempting to become a Mall version/clone of Target, has made some headway towards changing perceptions. And because of the closings created by the merger, those left (Macy’s, Boscov’s) have had short term sales gains. But the large issues remain, and the 25 year decline in market share of moderate department stores will probably continue until they address the key issues which are; providing a quick and convenient shopping experience for time stressed soccer moms and dads and; being fashion leaders as they once were, instead of focusing on making ‘deals” with large vendors, and focusing on finding compelling products for customers sick of the… Read more »
Ganapathy Subramanian
Guest
Ganapathy Subramanian
14 years 10 months ago

I worked in US retail and presently am working for another retail company in India.

The customers are the same throughout the world. Why do customers purchase from the same store? It may be because of the following reasons:

1. The customers are used to the particular store; they are used to it’s ambiance and layout.

2. Customers are used to the store’s merchandise style, display design and the friendly attitude of the staff – personal attention to the customer and, moreover, the store staff knows their regular customers. Special customer service can be provided by the sales team. Above all, the store must be feeding the customers on design, size and price.

Facilities like car parking, shopping safety and distance from the home – these are all the other factors attractive to the customer.

Very important – uncompromising customer service pays huge.

dan miller
Guest
dan miller
14 years 10 months ago
I think there will always be the “Department Store” customer out there…and I feel there is plenty of room to grow. The basic problem I see in most department stores is the overstuffed aisles, the dated product mix, and the drabness of display. Since the majority of shopping at department stores is done visually versus financially, this is an area of great concern. Displays need to be made brighter and edgier; they need to be changed much more frequently; departments need to be opened up and brightened up. It seems that department stores feel the need to “hold on” to merchandise past its prime, which doesn’t allow for the introduction of new products. Buyers and Merchandise Managers need to get that old non-selling merchandise out of the stores and a lot faster than they do currently. Set a reasonable turnover time on merchandise and stick with it. Try marking it down once, then get it out of the store mix. There will always be a home in the department store format for the classics…the perfume… Read more »
John Lansdale
Guest
John Lansdale
14 years 10 months ago

I answered location because, as a computer geek, I buy so much from the web. Location is important only for things too heavy to ship economically and then I find the store with my product using a search engine. Sometimes I do shop first at a department store, but always with a keen eye towards value – as learned from the www.

To someone considering stores though, this answer probably reveals more about the RetailWire reader’s shopping personality than it does about shoppers in department stores. Because to answer this question in a useful way, one would have had to know a good deal more about the demographics. Which types of people (i.e. age, sex, citizenship, income, education…) spend how much on what and how many in each category. What then does the collective opinion say?

My real opinion is, back to market research 101 for this poll author.

Robert Craycraft
Guest
Robert Craycraft
14 years 10 months ago

If there is any hope for American department stores, it is to be seen at the revamped Marshall Field’s State Street flagship before Macy’s “rationalizes” it. Excited, unique merchandise, events going on all over the store, incredible. I was in Chicago over four days and in the store three of those. I could not believe how the store changed with new displays, interesting promotions, etc. I can’t imagine you could live or work within several blocks of this store and not go in.

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